Wages finally rising, but not for middle class
Hunzelmann, a truck driver, is a beneficiary of a tightening labor market. But he does not have company-provided health benefits, and thankful as he was for the raise, the 52-year-old father of two says it’s still a hand-to-mouth existence for his family.
“We don’t have money to save to put into the bank. Everything is gone,” said the resident of Gaithersburg, Md., tanking up his white truck loaded with recycled materials.
Across the country, wages that were stuck for years finally seem to have started to rise faster, especially in industries such as trucking, which is begging for workers.
Average hourly earnings for all private-sector employees last month grew at a 2.9 percent annual rate of increase, the most since 2009. That has fueled hopes for workers. It has also spooked some investors with fears of higher inflation and interest rates, which have convulsed financial markets.
But wage gains thus far have been very uneven, according to detailed Labor Department statistics. They’re concentrated at the higher end of the pay scale and the lower — well-paid executives at one end, workers such as Hunzelmann at the other.
By and large, the broad middle of the labor force has not seen much of a raise, mirroring a long-running trend of income polarization and a shrinking middle class in America.
Even with unemployment at a 17-year low of 4.1 percent, the proverbial rising tide has not lifted all boats: The fancy yachts have gotten most of the lift.
Take the finance sector, which has led the pack in the recent wage increases.
Some 8.5 million people work in banking, insurance and real estate; their average hourly pay jumped 4.2 percent in January from a year earlier, to just a penny under $34 an hour.
But for ordinary nonsupervisory employees in finance — about four out of five financial-industry workers — the average increase was just 1.6 percent, to $26.75 an hour.
A similar, though smaller, gap can be seen in other industries, including health care, retail trade, information and professional services such as computer systems designs.
“It’s a pulling apart at the top,” said Elise Gould, a senior economist at the Economic Policy Institute, a liberal-oriented group, noting that if the latest trend continues, it will exacerbate the country’s already large income inequality.
The Republican tax overhaul that passed in December is expected to stimulate economic growth, and Trump administration officials say that will lead to broad-based wage gains as companies will have more cash to give to workers.
Many economists, however, doubt the $1.5 trillion tax overhaul will prove to be a windfall for most workers. History and recent surveys suggest that companies are more likely to use most of the tax savings to buy back shares, reward stockholders and make acquisitions.
Stronger economic growth will likely push the jobless rate down further. Already unemployment has fallen to a level that in the past has generated wage gains of around 3.5 percent to 4 percent.
Some analysts think wage increases are on the cusp of moving up to that range again. After several years of spending a constant 3 percent more for salaries, U.S. companies now appear to be budgeting a little more for pay, said Sue Holloway, a director at WorldatWork, a nonprofit group that studies compensation and benefit trends.
“We’re at a point now where the labor market is heating up,” she said.
Wage gains at the bottom of the pay scale could, eventually, put upward pressure on pay in the middle. But a number of factors could restrain pay gains, at least for most workers: sluggish productivity growth; a shift to giving bonuses as opposed to raises; continued outsourcing of business services; and what appears to be a more concentrated labor market in certain regions and industries that gives companies greater bargaining power.